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• The European DJ Stoxx 50 this morning is trading +0.10%. The main bullish factor is this morning's $1.06 decline in crude oil prices and the end of the Russian military actions in Georgia. The financial sector was hurt by JPMorgan's announcement of another $1.5 billion in write-downs in the current quarter, although UBS rallied more than 3% after saying that it will separate its investment banking and wealth management divisions and give its three business segments greater autonomy, which fueled speculation the bank may sell its securities unit. Mining stocks are lower in European trading with this morning's -$6.30 sell-off in gold prices and -1.1 cent sell-off in copper prices. The Russian stock market today rallied more than 3% and the ruble rallied 1.2% after Russian President Medvedev announced a halt in Russian military operations in Georgia. Asia-Pacific stocks today closed mostly lower: Japan -0.95%, Hong Kong -1.00%, China -0.52%, Taiwan -0.43%, Australia +0.55%, Singapore -0.30%, South Korea -0.15%, Bombay -1.88%.
• US trade deficit – Today’s June US trade deficit report is expected to expand to -$62.0 billion from -$59.8 billion in May. The US trade deficit has been moving basically sideways in the range of -$55 billion to -$62 billion for the last 2-year years, moderately below the record high of -$67.1 billion posted in October 2005. The US trade deficit has shown some improvement mainly because of strong exports to the rest of the world, which has generally shown strong economic growth over the past several years. The weak dollar has also been helpful in boosting exports by making US exports cheaper for overseas buyers. However, the US trade deficit continues to see upward pressure from the sharp rally in crude oil prices which has boosted the dollar value of US petroleum imports. In addition, the US continues to have a poor savings rate, which means the US needs to import capital, which in turn is the accounting flip side of the US current account deficit. The US trade d eficit is likely to remain at a high level for the foreseeable future, at least until the US cuts its dependence on foreign oil and improves its savings rate. In addition, the recent rally in the dollar which remove some of the competitive pricing of US exports.
• US Treasury statement – Today’s July monthly budget statement expected at -$90 billion, which is a truly massive one-month figure. The US budget deficit has ballooned recently due to (1) the wars in Iran/Afghanistan, (2) the recent federal stimulus program, (3) a general lack of restraint on federal spending and entitlement programs, and (4) a weaker economy, which is undercutting Treasury revenues. The White House is forecasting a record federal budget deficit of $482 billion in fiscal-2009 (which begins October 1, 2008), up sharply from $389 billion in fiscal-2008 and $162 billion in fiscal-2007. The fiscal-2009 budget deficit would be 3.3% of GDP, which would be the highest since 2004 but well below the levels as high as 6% seen in the 1980s and early 1990s. The total federal debt is likely to reach 40% of GDP in 2009. The Treasury has recently been boosting the size of nearly all of its auctions and increasing the frequency of some auction issues in order to pay for the federal government’s deficit spending, thus keeping a damper on Treasury security prices.

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• September S&Ps this morning are trading -0.10 points as the financial sector was undercut by JPMorgan's announcement of another $1.5 billion in write downs. However, supportive factors this morning include this morning's $1.06 sell-off in oil prices and the end of Russia's military operations in Georgia. The US stock market yesterday continued last week's rally and closed higher (Dow +0.41%, S&P 500 +0.69%, Nasdaq Composite +1.07%).
• Bullish factors for stock prices yesterday included (1) the continued sell-off in crude oil prices to a 3-1/4 month low which boosted retailers and transportation stocks, (2) the +7.3% rally in GM after the CEO of largest US automaker said the company's struggles with US job cuts, rising retiree heakth-care costs and pension problems are "largely behind us," (3) the rally in airline stocks after a Morgan Stanley analyst said the current decline in oil prices is a "game-changing event" and if oil prices average $115 a barrel in 2009 then the airline industry will be profitable, and (4) the +2.4% gain in Apple after CEO Jobs said software sales for the company's iPhone may hit $360 million a year if users continue to download applications at the present rate and sales may hit $500 million "soon" and the marketplace may eventually be worth $1 billion. 
• Bearish factors for stock prices yesterday included (1) the -7.2% drop in Fannie Mae and the -5.1% fall in Freddie Mac after comments from US Treasury Secretary Paulson that there are no plans to inject capital into the mortgage lenders and that the US housing slump will last beyond this year, (2) the -1.6% drop in AIG as the world's largest insurer had its profit estimates cut through 2012 by Goldman Sachs, saying the company may need more capital after posting $25 billion in losses, and (3) the Fed's quarterly Senior Loan Officer Survey which stated that banks tightened credit standards for consumers and businesses even more since its last April survey as defaults and delinquencies on home loans climbed, signaling a continued tightening of credit as banks are still reluctant to lend.
• JPMorgan said is will write down mortgage-backed assets by least another $1.5 billion in the current quarter.
• Goldman Sachs is down -0.8% in European trading this morning after Deutsche Bank cuts its recommendation on Goldman to "hold" from "buy."
• LDK Solar (LDK) rallied 18% in European trading this morning after reporting stronger than expected earnings of $1.29 per share (versus the analyst consensus of 43 cents).
• Zoltek (ZOLT) fell 9% in European trading this morning after reporting disappointing earnings ex-items of 12 cents per share (versus the analyst consensus of 31 cents).
• North American airline stocks may get a boost on this morning's open after JPMorgan upgraded the North American airline sector due to the recent sharp decline in fuel prices. JPMorgan raised Continental Airlines to "overweight" from "underweight" and raised Alaska Air and Delta to "overweight" from "neutral.

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• September 10-year T-notes this morning are trading +6.5 ticks on the JPMorgan news and on lower oil prices, which will help the inflation outlook. September T-note prices yesterday moved lower and closed -14 ticks. Bearish factors for T-note prices yesterday included (1) a weakening in the demand for the safety of Treasuries as the S&P 500 Index surged to a 1-1/2 month high, and (2) carryover weakness from European debt prices after hawkish comments from ECB Council member Liebscher that ECB policy makers remain focused on the "worrying" level of inflation. Bullish factors for T-note prices yesterday included (1) the Fed's quarterly Senior Loan Officer Survey that said more banks tightened credit standards for consumers and business borrowers since April as defaults and deliquencies on home loans rose, and (2) a lessening of inflation concerns as crude oil prices fell to a 3-1/4 month low and the CRB index (an index of commodities) declined to a 4-1/4 month low.
• The dollar is trading slightly higher this morning with the dollar/yen up +0.16 yen and the euro/dollar down -0.26 cents. The dollar index yesterday continued last week's sharp rally as the dollar closed at a 5-1/2 month high. Bullish factors for the dollar yesterday included (1) concerns about Russian military intentions with its apparent push into Georgia proper, which undercut the euro, (2) the unexpected declines in Jun French industrial and manufacturing production, (3) Moody's Investors Service's statement that defaults on loans included in European commercial mortgage-backed securities surged 80% in Q2, sparking concern the financial turmoil within the Euro-Zone is deepening, and (4) the rise in the dollar/yen to a 7-1/4 month high as the US stock market continued higher and prompted a resumption in the carry trade which weakened the yen. Bearish factors for the dollar yesterday included (1) comments from ECB Council member Liebscher that ECB policy makers rem ain focused on the "worrying" level of inflation, and (2) the larger-than-expected increase in Jun German wholesale prices (+9.9% y/y) to its highest level since the data series began in Jan 2000. 
• September crude oil prices this morning are trading -$1.06 a barrel and September gasoline is trading -2.00 cents a gallon. September crude oil prices yesterday moved lower and closed -$0.75 a barrel and September gasoline closed -2.08 cents a gallon. September crude oil and gasoline both posted 3-1/4 month lows yesterday. Bearish factors for crude oil prices yesterday included (1) the continued surge in the dollar to a 5-1/2 month high, reducing the appeal of commodities as an inflation hedge, and (2) weakening global demand as the 7% y/y decline in Chinese crude oil imports in July pushed Chinese crude imports to their lowest level in 7 months. A bullish factor for crude oil prices yesterday is the continued armed conflict between Russia and Georgia, which threates alternative export routes for Azerbaijan crude oil after a Turkish pipeline was sabatoged last week by Kurdish militants and cut off crude oil from the Baku-Tbilisi-Ceyhan pipeline. Expectations for to morrow's DOE inventory report are for a -600,000 bbl decline in crude oil inventories, a -2.0 million bbl drop in gasoline stockpiles, a +1.75 million bbl gain in distillate inventories and a -0.5 decline in the capacity of refiners to 86.5%.

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Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): TRI-Thomson Reuters (BEST earnings consensus $0.37 per share), AMAT-Applied Materials (0.14), TJX-TJX (0.45), NVDA-Nvidia (0.14), WW-Watson Wyatt (0.80), FOSL-Fossil (0.25), CREE-Cree (0.14), IART-Integra Lifesciences Holdings (0.45), SRX-SRA Internatinal (0.32), BZP-BPZ Resources (0.03), VSE-Verasun Energy (0.02)

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